High Cost Of Medicare: Cutting Doctor Reimbursements

Leave it up to the federal government to figure out how to cut doctor reimbursements for Medicare and drive up the costs at the same time.

How?

According to the latest issues of Bloomberg Businessweek, Medicare pays hospitals as much as three times higher reimbursements for treatments than it does doctors.

So as it cuts doctor reimbursements, physicians are under pressure to sell their practices to hospitals.

“Under Medicare’s tangled payment system, hospitals get higher reimbursements than individual doctors for cardiology treatment and other specialty services—in some cases a lot higher. The program pays a hospital $400 for an echocardiogram, $180 for a cardiac stress test, and more than $25 for an electrocardiogram, according to data from the American College of Cardiology. At a private physician’s office, Medicare pays $150 for an echocardiogram, $60 for a cardiac stress test, and $10 for an electrocardiogram.

“Large hospital chains also have more power than individual doctors to negotiate reimbursements from insurers such as UnitedHealth Group (UNH) and WellPoint (WLP). The result: Instead of controlling costs by keeping payments to doctors down, the federal government may be driving them higher. “Clearly, in the short run, it raises costs,” says Paul Ginsburg, president of the Center for Studying Health System Change, a nonprofit research group. “A physician becomes employed by a hospital, and now a payer, like Medicare, has to start paying more.”

The hope is that hospitals will accepts lump-sum payments to treat an illness instead of charging for each procedure, thereby forcing efficiencies.